Why do borrowers default on online loans? An inquiry of their psychology mechanism. Issue 4 (6th April 2020)

• Record Type: Journal Article
• Authors: Wang, Xiaolun; Xu, Yunjie Calvin; Lu, Tian; Zhang, Chenghong
• Is Part Of: Internet research. Volume 30:Issue 4(2020)
• Page Start: 1203
• Page End: 1228
• Publication Date: 2020-04-06
• Subjects: Default intention -- Microloan -- Credit assessment -- Psychology -- Negative affects -- General strain theory; Internet -- Periodicals; Computer networks -- Periodicals; 004.678
• DOI: 10.1108/INTR-05-2019-0183
• Languages: English
• ISSNs: 1066-2243

Abstract

Abstract : Purpose: In the online microloan market, the ability to evaluate the credit risk of borrowers is key to business success. Based on the general strain theory, this study proposes a contextualized two-stage model with stress factors, negative affects and constraint factors to explain the psychological mechanism of borrowers' default behaviors. Design/methodology/approach: An online survey is conducted to test the hypotheses. We collect and analyze 713 valid responses through a structural equation model. Findings: (1) Economic and social strains experienced by borrowers can cause four types of negative affects: life dissatisfaction, perceived unfairness, inferiority feeling and loneliness; (2) Both strains and negative affects have a considerable effect on borrowers' default intention; (3) Moral norm plays a negative moderating role in the relationship between strains, negative affects and default behavior, whereas perceived deterrence shows a strong main effect. Originality/value: (1) This study introduces the GST from sociology and criminology, and contextualizes it in the microloan context to explain default behavior; (2) This study provides a comprehensive and staged psychological mechanism to explain deviant behavior; (3) This study bears critical implications for the current practice in credit assessment and default prevention.